US dollar revved up for jobs data, Nikkei hits a high

SYDNEY (Reuters) - The US dollar held pole position in Asia on Friday as bulls wagered a looming U.S. jobs report would add to the chance of rate hikes there, even as the European Central Bank embarks on a trillion euro campaign of bond-buying.

The same balance of risks kept most equity investors guarded with MSCI's broadest index of Asia-Pacific shares outside Japan edging up 0.4 per cent.

Shanghai shares added 0.2 per cent as China's finance minister said an expansionary fiscal policy was needed to help prevent a sharp economic slowdown.

The main exception was Japan's Nikkei which rose 1 per cent to a 15-year top as the yen weakened on the dollar.

Analysts polled by Reuters expect US payrolls to have increased 240,000 last month and the jobless rate to have ticked down to 5.6 per cent from 5.7 per cent.

The recent run of US economic news has been mixed at best, leading analysts to steadily downgrade forecasts for growth this quarter. A strong jobs report could offset all that and give the Fed reason to stick to its tightening timetable at the next policy meeting on March 17 and 18.

"Another healthy job gain, particularly if accompanied by another relatively firm gain in average hourly earnings, would go a long way toward solidifying expectations for 'patient' being removed from the March statement and increasing the perceived odds of a rate hike in June," said Edward Acton, a Treasury strategist at RBS.

Late Thursday, San Francisco Fed chief John Williams said he thought that by mid-year it would be time for the Fed to have a serious discussion about tightening.

An upbeat jobs report would typically be positive for Wall Street, but the risk of an earlier hike may complicate the market's reaction.

Investors were playing it safe on Thursday with the Dow ending up a bare 0.21 per cent, while the S&P 500 gained 0.12 per cent and the Nasdaq 0.32 per cent.

European markets had no such reservations as shares reached their highest in more than seven years, boosted by encouraging comments from the European Central Bank and strong results from supermarket Carrefour.

The pan-European FTSEurofirst 300 index ended Thursday up 0.8 per cent.

ECB president Mario Draghi said the bank's bond-buying programme, due to start on Monday, may last beyond September 2016 if necessary. The bank also increased its economic growth forecasts for this year and next.

Draghi also surprised some by saying the central bank would be prepared to buy bonds with negative yields of up to 20 basis points, triggering a big rally in euro zone bonds.

With yield spreads widening in the dollar's favour, the euro broke below US$1.1000 for the first time since September 2003, but has since drifted back to US$1.1025.

The dollar index traded at 96.334, having climbed as far as 96.593 - a high not seen since September 2003. It was also firm on the yen at 120.00 and held hefty gains on a broad range of emerging market currencies.

In commodity markets, US crude was quoted 34 cents firmer at US$51.10, while Brent crude gained 47 cents to US$60.95 a barrel.